Crude rallies with US poised to sharpen moves to curb Iran exports

Brent crude jumped above $74 a barrel on Monday, the highest since November, as the US was primed to announce measures to further curb Iran’s oil exports, putting pressure on global supplies.

A senior US official told the Financial Times that Michael Pompeo, the US secretary of state, would on Monday say that buyers of Iranian oil — such as Japan, South Korea, Turkey, India and China — would need to cut imports to zero or face penalties.

The end of these sanctions waivers would come as the US has ramped up the pressure on Iran in recent weeks and as oil prices have risen sharply amid voluntary production cuts by Opec countries and unintended supply disruptions.

Brent, the international oil benchmark, rose to $74.31 a barrel in early Asia trading, before retreating to $73.61, up $1.64. West Texas Intermediate, the US marker, increased to a high of $65.87 a barrel, before easing to $65.35.

Sara Vakhshouri, energy consultant at SVB Energy International said a “zero export policy” would have “significant consequences on the oil market and prices.”

Despite withdrawing from the nuclear deal with Iran and imposing sanctions against Tehran, the Trump administration provided allowances for big consumers of the country’s oil to carry on purchasing these barrels, albeit at lower levels.

The aim of these exemptions was to prevent a damaging crude price spike, which the US now believes is less likely to happen.

“The general consensus was for a rollover of waivers with reduced allocations. This is therefore a bullish development,” said Olivier Jakob at energy consultancy Petromatrix.

The US official said the administration has been given assurances from Saudi Arabia — the world’s largest exporter — and the UAE that additional supplies could be brought online to prevent a jump.

Saudi officials have privately been wary about responding to US demands. The kingdom accelerated output last year in anticipation of the Trump administration reimposing sanctions on Iran and implementing a stricter policy on crude exports. The US then maintained the waivers for buyers, triggering a price slide.

In December Opec alongside its partners outside of the cartel including Russia agreed to curb production to bring the market into balance. Ministers from oil producing countries are due to meet in Jeddah next month and in Vienna in June.

A person familiar with Saudi energy policy said that while the kingdom is willing to “help meet any shortfall”, particularly as supply risks remain in Libya and Venezuela, the Opec kingpin wanted to see the full impact of the US’s policy on waivers.

Still, few energy sector analysts believe the US will be able to completely cut Iran’s oil exports with countries such as China and India keen to maintain their purchases of the country’s crude.

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